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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Jun. 30, 2012	Aug. 06, 2012
Document and Entity Information
Entity Registrant Name	DLH Holdings Corp.
Entity Central Index Key	0000785557
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		9,305,702
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2012	Sep. 30, 2011
CURRENT ASSETS:
Cash and cash equivalents	$ 3,127	$ 763
Accounts receivable, net of allowance for doubtful accounts of $0 as of June 30, 2012 and September 30, 2011	12,520	11,112
Prepaid workers' compensation	517	513
Other current assets	233	184
Total current assets	16,397	12,572
EQUIPMENT AND IMPROVEMENTS:
Furniture and equipment	139	177
Computer equipment	126	102
Computer software	408	260
Leasehold improvements	24	21
Equipment and improvements, gross	697	560
Less accumulated depreciation and amortization	(396)	(346)
Equipment and improvements, net	301	214
GOODWILL	8,595	8,595
OTHER ASSETS
Deferred financing costs, net	13	26
Other assets	794	510
Total other assets	807	536
TOTAL ASSETS	26,100	21,917
CURRENT LIABILITIES:
Bank loan payable	1,464	740
Notes payable	711	711
Current portion of capital lease obligations	49	8
Accrued payroll	10,597	10,318
Accounts payable	2,389	1,983
Accrued expenses and other current liabilities	2,113	2,134
Liabilities from discontinued operation	193	235
Total current liabilities	17,516	16,129
LONG TERM LIABILITIES
Convertible debenture, net	156	46
Derivative financial instruments, at fair value	130	182
Other long term liability	85	6
Total long term liabilities	371	234
Total liabilities	17,887	16,363
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.10 par value; authorized 5,000 shares; none issued and outstanding
Common stock, $.001 par value; authorized 40,000 shares; issued 9,307 at June 30, 2012 and 6,023 at September 30, 2011, outstanding 9,305 at June 30, 2012 and 6,021 at September 30, 2011	9	6
Additional paid-in capital	75,316	70,988
Accumulated deficit	(67,088)	(65,416)
Treasury stock, 2 shares at cost at June 30, 2012 and September 30, 2011	(24)	(24)
Total shareholders' equity	8,213	5,554
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 26,100	$ 21,917

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2012	Sep. 30, 2011
CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 0	$ 0
Preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, authorized shares	5,000,000	5,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized shares	40,000,000	40,000,000
Common stock, issued shares	9,307,000	6,023,000
Common stock, outstanding shares	9,305,000	6,021,000
Treasury stock, shares	2,000	2,000

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
REVENUES	$ 12,618	$ 10,579	$ 36,732	$ 31,598
DIRECT EXPENSES	11,028	9,066	32,277	27,259
GROSS PROFIT	1,590	1,513	4,455	4,339
GENERAL AND ADMINISTRATIVE EXPENSES	1,942	1,749	5,531	4,872
SEVERANCE	236	11	236	11
DEPRECIATION AND AMORTIZATION	37	28	87	87
Loss from operations	(625)	(275)	(1,399)	(631)
OTHER INCOME (EXPENSE)
Interest income	13		13	7
Interest expense	(84)	(111)	(246)	(218)
Amortization of deferred financing costs	(57)	(7)	(143)	(14)
Change in value of financial instruments	186		102
Loss on retirement of assets	(2)		(2)
Other income, net	1	2	3	4
Legal expense related to pre-acquisition activity of acquired company		(19)		(78)
Total other income (expenses)	57	(135)	(273)	(299)
Loss from continuing operations before income taxes	(568)	(410)	(1,672)	(930)
INCOME TAX EXPENSE	0		0
Loss from continuing operations	(568)	(410)	(1,672)	(930)
GAIN FROM DISCONTINUED OPERATION		270		270
NET LOSS	$ (568)	$ (140)	$ (1,672)	$ (660)
NET GAIN (LOSS) PER SHARE - BASIC AND DILUTED
Loss from continuing operations (in dollars per share)	$ (0.09)	$ (0.07)	$ (0.27)	$ (0.17)
Gain from discontinued operation (in dollars per share)		0.05		0.05
Net loss per share (in dollars per share)	$ (0.09)	$ (0.02)	$ (0.27)	$ (0.12)
WEIGHTED AVERAGE BASIC AND DILUTED SHARES OUTSTANDING (in shares)	6,621	5,663	6,254	5,308

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (1,672)	$ (660)
Adjustments to reconcile net loss to net cash used in operating activities, net of divested business:
Depreciation and amortization including debt costs	146	89
Change in fair value of derivative financial instruments	(94)
Compensation expense related to employee stock option grants	145	64
Compensation expense related to employee restricted stock grants	50	14
Compensation expense related to director restricted stock grants	123	20
Share based expense on non employee options	19
Warrants issued to consultants	9
Other non cash compensation	12	6
Loss on retirement of equipment	13	17
Changes in operating assets and liabilities, net of divested business:
Accounts receivable	(1,408)	(1,176)
Other current assets	(53)	190
Other assets	(271)	(90)
Accounts payable, accrued payroll, accrued expenses and other current liabilities	664	(538)
Other long term liabilities	79	(4)
Cash flows from discontinued operation		(270)
Net cash used in operating activities	(2,238)	(2,338)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment, leasehold improvements and software	(137)	(24)
Net cash used in investing activities	(137)	(24)
CASH FLOWS FROM FINANCING ACTIVITIES
Net advances on revolving line of credit	724	1,807
Rights offering proceeds	4,197
Rights offering expenses	(184)
Change on capital lease obligations	41	(14)
Proceeds from sale of common stock	3	150
Cash flows from discontinued operation	(42)	(57)
Net cash provided by financing activities	4,739	1,886
Net increase/(decrease) in cash and cash equivalents	2,364	(476)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	763	1,187
CASH AND CASH EQUIVALENTS AT END OF PERIOD	3,127	711
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	219	210
Cash paid during the period for income taxes	$ 7	$ 31

ORGANIZATION AND BUSINESS:

9 Months Ended

Jun. 30, 2012

ORGANIZATION AND BUSINESS:

ORGANIZATION AND BUSINESS:

(1) ORGANIZATION AND BUSINESS:

For more than 25 years, DLH Holdings Corp. (“DLH” formerly TeamStaff Inc.), has provided professional services to the U.S. Government. Headquartered in Atlanta, Georgia, DLH employs approximately 1,000 skilled technicians, logisticians, engineers, healthcare and support personnel at more than 25 locations around the United States. DLH’s operating unit, DLH Solutions, is organized into three broad integrated business areas: Healthcare Delivery Solutions, Logistics and Technical Services, and Contingency / Staff Augmentation Services. Our customers, a majority of whom are within the Departments of Defense (“DoD”) and Veterans Affairs (“DVA”), benefit from proven leadership processes, technical excellence, and cost management. The remaining portion of DLH’s business is comprised of customers within the Center for Disease Control and Prevention, Departments of Justice, Agriculture, Interior and Federal Emergency Management Agency throughout the United States.

In February 2012, the Company’s shareholders approved a proposal to change its corporate name to DLH Holdings Corp. On June 25, 2012 the Company filed an amendment to its certificate of incorporation to implement the change in its corporate name to DLH Holdings Corp. (together with its subsidiaries, “DLH” or the “Company” and also referred to as “we,” “us” and “our”). DLH’s primary operations are located in Loganville, Georgia and its principal executive offices are located at 1776 Peachtree Street, Atlanta, Georgia 30309.

Corporate History

DLH Holdings was incorporated in 1969 under the laws of the State of New Jersey corporation, was originally incorporated in 1969 as a payroll staffing company. Through several acquisitions over recent decades, the Company has evolved considerably and in early 2010, made the strategic decision to build the Company around its government services entity, DLH Solutions, Inc. (formerly, TeamStaff Government Solutions, Inc.) The Company is now completely focused on government services both as a prime contractor as well as partnering with other government contractors. The Company’s other wholly-owned subsidiaries are not actively operating.

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES:

9 Months Ended

Jun. 30, 2012

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES:

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES:

DLH, HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012 (UNAUDITED)

(2) LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES:

Liquidity

In recent years, the Company has sought to finance its operations and capital expenditures through the sale of equity securities, convertible notes and more recently, through the proceeds from a rights offering. The Company’s immediate sources of liquidity include cash and cash equivalents, accounts receivable, unbilled receivables and access to its asset-based credit facility with Presidential Financial Corporation. The Company’s operating liabilities are largely predictable and consist of vendor and payroll related obligations. The Company’s operations require substantial working capital to fund the future growth of its business model with expanded business development efforts, and planned capital expenditures to support a larger customer base.

At June 30, 2012, the Company had a net working capital deficit of approximately $1.1 million and an accumulated deficit of approximately $67.1 million. For the nine months ended June 30, 2012, the Company incurred an operating loss and a net loss of approximately $1.7 million and $1.7 million, respectively.

In fiscal 2011 the Company completed measures to enhance its liquidity by approximately $1,000,000 as a result of increasing the maximum availability of its credit facility and receiving funding of and/or commitments for additional equity and/or debt financing. In that regard, our largest shareholder, Wynnefield Capital, Inc., and certain of our directors and executive officers collectively provided a total of $500,000 of additional capital to the Company. As described in Note 7, $150,000 of such capital was provided through equity investments on March 31, 2011 and $350,000 of such capital was provided in July 2011 by Wynnefield Capital through the sale of convertible debentures. In addition, as described in Note 6, on February 9, 2011, the Company entered into an amendment of its Loan and Security Agreement with Presidential Financial Corporation, pursuant to which they agreed to increase the maximum availability under the Loan and Security Agreement by an additional $500,000 and provide an unbilled receivable facility within the limits of the Loan and Security Agreement. Further, in May 2012, the Company entered into another amendment to the Loan Agreement pursuant to which the Lender agreed to increase the available line of credit from $3,000,000 to a maximum amount of $6,000,000 and to increase the maximum amount available under the unbilled accounts facility of the Loan Agreement from $500,000 to $1,000,000. However, as described in greater detail in Note 6 below, the Company’s ability to borrow against the increased available credit is subject to the satisfaction of a number of conditions, and presently, the maximum availability under this loan facility is $3,000,000; subject to eligible accounts receivable.

At June 30, 2012, the amount of unused availability was $588,000. The amount outstanding on the loan facility as of June 30, 2012 was $1,464,000. In addition, as described in greater detail below, the parties have amended certain other provisions of the Loan Agreement, including an extension of the term of the Loan Agreement for an additional year and the Lender agreed not to seek to terminate the Loan Agreement without cause until after December 31, 2012. In addition, pursuant to its current credit facility, the financial institution also has the ability to terminate the Company’s line of credit immediately upon the occurrence of a defined event of default, including among others, a material adverse change in the Company’s circumstances or if the financial institution deems itself to be insecure in the ability of the Company to repay its obligations or, as to the sufficiency of the collateral. At present, the Company has not experienced and the financial institution has not declared an event of default.

On March 16, 2012, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission for a rights offering in which its existing stockholders received non-transferable rights to purchase $4.2 million of additional shares of the Company’s common stock. Under the terms of the rights offering, the Company distributed to the holders of its common stock non- transferable subscription rights for each share of common stock owned on the record date. Each subscription right entitled the holder to purchase 0.532 shares of the Company’s common stock at a price of $1.30 per share. In connection with the rights offering, on April 30, 2012, the Company entered into a standby purchase agreement with Wynnefield Capital, Inc. (“Wynnefield Capital”), which owned, prior to the rights offering, approximately 21% of the Company’s common stock (excluding common stock warrants and a convertible note) and post rights offering, approximately 44% of our common stock (excluding common stock warrants and convertible note) through certain affiliated entities. Pursuant to the standby purchase agreement, Wynnefield Capital (or affiliated assignees) agreed to acquire from the Company in the rights offering, subject to the satisfactions of specified conditions, the shares of common stock that related to any rights that remained unexercised at the expiration of the rights offering. The closing of the rights offering occurred on June 15, 2012 and the Company raised gross proceeds of $4.2 million from the sale of 3,230,769 shares of common stock.

Management believes, at present, that: (a) cash and cash equivalents of approximately $3.1 million as of June 30, 2012; (b) the amounts available under its line of credit (which, in turn, is limited by a portion of the amount of eligible assets); (c) forecasted operating cash flow including timely collection of the retroactive billings; (d) the ultimate non-payment of certain liabilities and recorded guarantees currently contested by the Company or not expected to be settled in cash (see Note 6 to the accompanying consolidated financial statements) (classified as current at June 30, 2012) in fiscal 2012, or the applicable portion of 2013; and (e) effects of cost reduction programs and initiatives should be sufficient to support the Company’s operations for twelve months from the date of these financial statements. However, should any of the above- referenced factors not occur substantially as currently expected, there could be a material adverse effect on the Company’s ability to access the level of liquidity necessary for it to sustain operations at current levels for the next twelve months. In such an event, management may be forced to make further reductions in spending or seek additional sources of capital to support our operations. If the Company raises additional funds by selling shares of common stock or convertible securities, the ownership of its existing shareholders would be diluted.

Presently, the Company derives all of its revenue from agencies of the Federal government and the Company has derived a substantial portion of its revenues through various contracts awarded by the DVA. The Company currently provides services to the DVA under a single source Blanket Purchase Agreement awarded in fiscal 2011 that has a ceiling value of approximately $145,000,000 and is scheduled to expire on October 31, 2016. The agreement is subject to the Federal Acquisition Regulations, and there can be no assurance as to the actual amount of services that the Company will ultimately provide under the agreement. This agreement represented approximately 45% of its revenue in the fiscal year ended September 30, 2011. In addition, the Company also holds contractual order cover through various dates in fiscal 2012 in respect of DVA contracts that generated close to a further 50% of its revenue in the fiscal year ended September 30, 2011, which are not currently the subject of requests for proposals and may in due course be further extended by the DVA on a sole source basis, although no assurances can be given that this will occur. The Company’s results of operations, cash flows and financial condition would be materially adversely affected in the event that we are unable to continue our relationships with the DVA or suffer a significant diminution in the quantity of services that they procure from the Company.

Basis of Presentation

The consolidated interim financial statements included herein have been prepared by DLH, without audit, pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. DLH believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in DLH’s fiscal 2011 Annual Report on Form 10-K which was filed on December 2, 2011. This interim financial information reflects, in the opinion of management, all adjustments necessary (consisting only of normal recurring adjustments and changes in estimates, where appropriate) to present fairly the results for the interim periods. The results of operations and cash flows for such interim periods are not necessarily indicative of the results for the full year.

The accompanying consolidated financial statements include the accounts of DLH and its subsidiaries, all of which are wholly owned. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation. The cash flows, and related assets and liabilities of the Company’s previously discontinued TeamStaff Rx subsidiary have been reclassified to a discontinued operation in the accompanying consolidated financial statements from those of continuing businesses for all periods presented.

Revenue Recognition

DLH’s revenue is derived from professional and other specialized service offerings to US Government agencies through a variety of contracts, some of which are fixed-price in nature and/or sourced through Federal Supply Schedules administered by the General Services Administration (“GSA”) at fixed unit rates or hourly arrangements. We generally operate as a prime contractor, but have also entered into contracts as a subcontractor. The recognition of revenue from fixed rates is based upon objective criteria that generally do not require significant estimates that may change over time. Other types of US Government contracts may include cost reimbursable contracts, fixed price or flexibly priced contracts requiring estimates based on percentage-of-completion methods of recognizing revenue and profit. These contracting vehicles do not, at this time, represent a significant portion of our revenue nor require estimating techniques that would materially impact our revenue reported herein. DLH recognizes and records revenue on government contracts when it is realized, or realizable, and earned. DLH considers these requirements met when: (a) persuasive evidence of an arrangement exists; (b) the services have been delivered to the customer; (c) the sales price is fixed or determinable and free of contingencies or significant uncertainties; and (d) collectability is reasonably assured.

Revenues related to retroactive billings in 2008 from an agency of the Federal government were recognized when: (1) the Company developed and calculated an amount for such prior period services and had a contractual right to bill for such amounts under its arrangements, (2) there were no remaining unfulfilled conditions for approval of such billings and (3) collectability is reasonably assured based on historical practices with the DVA. The related direct costs, principally comprised of salaries and benefits, are recognized to match the recognized reimbursements from the Federal agency; upon approval, wages will be processed for payment to the employees.

During the year ended September 30, 2008, DLH recognized revenues of $10.8 million and direct costs of $10.1 million related to these non-recurring arrangements. At June 30, 2012 and September 30, 2011, the amount of the remaining accounts receivable with the DVA approximated $9.3 million and accrued liabilities for salaries to employees and related benefits totaled $8.7 million. The $9.3 million in accounts receivable was unbilled to the DVA at June 30, 2012 and September 30, 2011. Although the timing cannot be guaranteed, at present the Company expects to bill and collect such amounts during fiscal 2012 based on current discussions with the DVA and collection efforts.

In April 2012, the Company received formal contract modifications from the DVA, dated April 16, 2012, concerning the retroactive billing matter. The contract modifications from the DVA incorporate relevant wage determinations covering largely 2006 and 2007 applying to the Company’s historical contracts with DVA during those periods. These government modifications initiate the procedures whereby the Company may invoice the DVA in accordance with the modified wage determinations and subsequently make timely retroactive payments to employees (active and inactive) covering work performed at the certain locations. The Company expects to follow the same process implemented as directed by and in conjunction with the Department of Labor and the DVA when similar wage determination-related contract modifications were made to cover other sites (also for the periods of 2006 and 2007) in 2008.

The Company continues to negotiate an incremental final amount related to indirect costs and fees applied to these retroactive billings. As such, there may be additional revenues recognized in future periods once the final approval for such additional amounts is obtained. The additional indirect costs and fees are estimated to be between $0.4 million and $0.6 million. Because these amounts remain subject to government review, no assurances can be given that we will receive any additional amounts from our government contracts or that if additional indirect costs and fees are received, that the amounts will be within the range specified above.

Goodwill

In accordance with applicable accounting standards, DLH does not amortize goodwill. DLH continues to review its goodwill for possible impairment or loss of value at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. At September 30, 2011, we performed a goodwill impairment analysis. For the purposes of this analysis, our estimates of fair value are based on the income approach, which estimates the fair value of the DLH Solutions unit based on the future discounted cash flows. Based on the results of the work performed, the Company has concluded that no impairment loss on goodwill was warranted at September 30, 2011. Major assumptions in the valuation study were the estimates of probability weighted future cash flows, the estimated terminal value of the company and the discount factor applied to the estimated future cash flows and terminal value. Estimates of future cash flows were developed by management having regard to current expectations and potential future opportunities. A terminal value for the forecast period was estimated based upon data of public companies that management believes to be similar with respect to the Company’s economics, products and markets. The discount factor used was a cost of capital estimate obtained from a leading third party data provider. The resulting estimated fair value of goodwill exceeded the carrying value at September 30, 2011 by more than 100%, resulting in no impairment charge being taken against goodwill. However, a non-renewal of a major contract (see Note 2—Liquidity) or other substantial changes in the assumptions used in the valuation study could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to future periods’ results of operations. DLH has concluded as of June 30, 2012, that there is not any required write off of goodwill. If an impairment write off of all the goodwill became necessary in future periods, a charge of up to $8.6 million would be expensed in the Consolidated Statement of Operations. All remaining goodwill is attributable to the DLH Solutions reporting unit.

Intangible Assets

As required by applicable accounting standards, DLH did not amortize its tradenames (“Teamstaff”), an indefinite life intangible asset. DLH reviewed its indefinite life intangible assets for possible impairment or loss of value at least annually or more frequently upon the occurrence of an event or when circumstances indicated that an asset’s carrying amount was greater than its fair value. On September 15, 2011, the Board of Directors of DLH approved the change of the corporate name of TeamStaff GS to DLH Solutions and also approved a plan to change the corporate name of the Company to DLH Holdings Corp. In connection with these actions, the Company will cease further use of the TeamStaff trademark and implement new marketing and branding initiatives associated with the new corporate identity being adopted by the Company. As a result of the corporate name change, abandoning the use of the TeamStaff name and associated rebranding efforts being implemented by the Company, the Company concluded that it was required to record a non-cash impairment charge with respect to the value of the “TeamStaff” trademark of $2.6 million to fully write-off the value of this trademark during the fourth quarter of fiscal 2011.

Income Taxes

DLH accounts for income taxes in accordance with the “liability” method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the consolidated balance sheet when it is determined that it is more likely than not that the asset will be realized. This guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. At June 30, 2012, the Company recorded a 100% valuation allowance against its net deferred tax assets of approximately $15.8 million.

The Financial Accounting Standards Board (“FASB”) has issued authoritative guidance that clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. This interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosures. The Company conducts business solely in the U.S. and, as a result, also files income taxes in various states and other jurisdictions. Given the substantial net operating losses and the related valuation allowance established against such amounts, the Company has concluded that it does not have any uncertain tax positions. There have been no income tax related interest or penalties for the periods presented in these consolidated financial statements. In the normal course of business, the Company and its subsidiaries are subject to examination by Federal and state taxing authorities. The Company’s income tax returns for years subsequent to fiscal 2008 are currently open, by statute, for review by authorities. However, there are no examinations currently in progress and the Company is not aware of any pending income tax audits.

Stock-Based Compensation

Compensation costs for the portion of equity awards (for which the requisite service has not been rendered) that are outstanding are recognized as the requisite service is rendered. The compensation cost for that portion of awards shall be based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. As of June 30, 2012, there was $227,000 remaining unrecognized compensation expense related to non-vested stock- based awards to be recognized in future periods.

Stock Options, Warrants and Restricted Stock

There was share-based compensation expense for employee options for the three months ended June 30, 2012 and June 30, 2011 of $78,000 and $17,000, respectively. During the three months and nine months ended June 30, 2012, 250,000 options were granted per the terms of an employment agreement with the Company’s new Chief Financial Officer and the Company recorded share-based compensation expense of $45,000 in connection with this grant. For the three months ended June 30, 2011, the Company did not grant any options to employees. There was share-based compensation expense for employee options for the nine months ended June 30, 2012 and June 30, 2011 of $145,000 and $64,000, respectively. During the nine months ended June 30, 2011, the Company granted 250,000 options per the terms of an employment agreement with the Company’s Executive Vice President and recorded share-based compensation expense of $18,000 in connection with this grant. There was $50,000 share-based compensation expense for restricted stock for the three and nine months ended June 30, 2012. There was no share based compensation expense for restricted stock for the three months ended June 30, 2011, and $14,000 share based expense for restricted stock for the nine months ended June 30, 2011. Certain awards vest upon satisfaction of certain performance criteria. As permitted, the Company will not recognize expense on the performance based shares until it is probable that these conditions will be achieved. Such charges could be material in future periods.

During the three months ended June 30, 2012 and June 30, 2011, the Company did not award any non-employee options to consultants. During the nine months ended June 30, 2012, the Company awarded a total of 25,000 options to consultants serving on its strategic advisory board which will expire in October 2016. These options have an exercise price of $1.88 per share and vest on the first anniversary of the grant date. The Company incurred share based compensation expense for the three and nine months ended June 30, 2012 of $6,000 and $19,000, respectively. The Company did not grant any non-employee options during the nine months ended June 30, 2011. The Company has unrecognized non-employee option expense for the nine months ended June 30, 2012 in the amount of $6,000.

During the three months ended June 30, 2012, and 2011, the Company did not grant any shares of restricted stock to employees. During the nine months ended June 30, 2012, the Company granted an aggregate of 53,750 shares of restricted stock to our non-executive directors, under its 2006 Long Term Incentive Plan, at the closing price on the award date of $2.28. All of these shares vested immediately. During the nine months ended June 30, 2011, the Company granted 35,000 shares of restricted stock to non-employee directors under its 2006 Long Term Incentive Plan, at the closing price on the award date of $.56. All of these shares vested immediately. Stock compensation expense associated with these grants was $122,550 and $20,000 for the nine months ended June 30, 2012 and 2011, respectively. During the three and nine months ended June 30, 2012 and 2011, no other shares of restricted stock vested.

The stock option activity for the nine months ended June 30, 2012 is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding, September 30, 2011	1,537,500		$	1.19	9.3	$	743,785
Granted	275,000		$	1.39
Cancelled	(350,000	)	$	1.38
Exercised	—		—
Options outstanding, June 30, 2012	1,462,500		$	1.19	8.8	$	158,375

At June 30, 2012, there were 462,500 options outstanding that were vested and exercisable and an additional 1,000,000 options outstanding that vest to the recipients when the market value of the Company’s stock achieves and maintains defined levels. The Company used a binomial valuation model and various probability factors in establishing the fair value of these options.

In addition, during the nine months ended June 30, 2012, an aggregate of 212,500 employee stock options to certain executive officers were cancelled, due to the Company not meeting certain performance based criteria during fiscal 2011, and 137,500 options expired in accordance with their terms due to the holders no longer being employed with the Company.

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount changes based on the fair market value of the Company’s stock.

At June 30, 2012, there were 52,500 shares of unvested restricted stock outstanding. As of June 30, 2012, there is $150,000 of unrecognized expense related to unvested restricted stock awards.

For the nine months ended June 30, 2012, the Company granted warrants to purchase 20,000 shares of common stock to a consultant for services, which warrants will expire in October 2016. These warrants have an exercise price of $2.28 per share and vest in two equal annual installments commencing on the first anniversary of the grant date. These warrants were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. The company recognized non-employee warrant expense for the three and nine months ended June 30, 2012, in the amount of $3,000 and $9,000, respectively. The Company has unrecognized non-employee warrant expense for the nine months ended June 30, 2012 in the amount of $15,000. During the three and nine months ended June 30, 2011, the Company did not recognize any non-employee warrant expense.

Changes in Shareholders’ Equity

The following is the changes in Shareholders’ Equity for the three months ended June 30, 2012:

(AMOUNTS IN THOUSANDS)

				Additional										Total
	Common Stock			Paid-In			Accumulated			Treasury Stock				Shareholders’
	Shares	Amount		Capital			Deficit			Shares	Amount			Equity

BALANCE, March 31, 2012	6,075	$	6	$	71,250		$	(66,520	)	2	$	(24	)	$	4,712

Director restricted stock grants	—			—										—
Exercise of stock options														—
Proceeds from sale of commons stock		3												3
Issuance of shares for services				2										2
Expense related to employee stock option grants				78										78
Fees related to rights offering				(177		)								(177		)
Non employee options				8										8
Warrant expense				(42		)								(42		)
Expense related to employee restricted stock grants				—										—
Rights offering	3,231			4,197										4,197
Net loss							(568		)					(568		)

BALANCE, June 30, 2012	9,306	$	9	$	75,316		$	(67,088	)	2	$	(24	)	$	8,213

The following is the changes in Shareholders’ Equity for the nine months ended June 30, 2012:

(AMOUNTS IN THOUSANDS)

				Additional											Total
	Common Stock			Paid-In			Accumulated			Treasury Stock					Shareholders’
	Shares	Amount		Capital			Deficit			Shares		Amount			Equity

BALANCE, September 30, 2011	6,021	$	6	$	70,988		$	(65,416	)	2		$	(24	)	$	5,554

Director restricted stock grants	54			123											123
Proceeds from sale of commons stock		3													3
Issuance of shares for services				12											12
Expense related to employee stock option grants				145											145
Fees related to rights offering				(184		)									(184		)
Non employee option expense				19											19
Warrant expense				(34		)									(34		)
Expense related to employee restricted stock grants				50											50
Rights offering	3,231			4,197											4,197
Net loss							(1,672		)						(1,672		)

BALANCE, June 30, 2012	9,306	$	9	$	75,316		$	(67,088	)	$	2	$	(24	)	$	8,213

Fair Value of Financial Instruments

The Company has financial instruments, principally accounts receivable, accounts payable, loan payable, notes payable, and accrued expense. Due to the short term nature of these instruments, DLH estimates that the fair value of all financial instruments at June 30, 2012 and September 30, 2011 does not differ materially from the aggregate carrying values of these financial instruments recorded in the accompanying consolidated balance sheets. In addition, the Company presents certain common stock warrants and embedded conversion features (associated with Convertible Debentures — See Note 7) and accounts for such derivative financial instruments at fair value.

Loss Per Share

Loss per share is calculated by dividing loss available to common shareholders by the weighted average number of common shares outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted loss per share is calculated by dividing the loss available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities. The effects of common stock equivalents of 1,462,500 are anti-dilutive for the three and nine months ended June 30, 2012. As such effects are anti-dilutive, there were no differences in the number of weighted average shares outstanding in determining basic and diluted loss per share the three and nine months ended June 30, 2012 and 2011.

DISCONTINUED OPERATION:

9 Months Ended

Jun. 30, 2012

DISCONTINUED OPERATION:

DISCONTINUED OPERATION:

(3) DISCONTINUED OPERATION:

Sale of TeamStaff Rx

Based on an analysis of historical and forecasted results and the Company’s strategic initiative to focus on core government business, in the fourth quarter of fiscal 2009, the Company approved and committed to a formal plan to divest the operations of TeamStaff Rx, our wholly-owned subsidiary, based at its Clearwater, Florida location. In evaluating the facets of TeamStaff Rx’s operations, management concluded that this business component meets the definition of a discontinued operation. Accordingly, the results of operations, cash flows and related assets and liabilities of TeamStaff Rx for all periods presented have been reclassified in the accompanying consolidated financial statements from those of our continuing business. Effective December 28, 2009, the Company and TeamStaff Rx entered into a definitive Asset Purchase Agreement with Advantage RN, providing for the sale of substantially all of the operating assets of TeamStaff Rx related to TeamStaff Rx’s business of providing travel nurse and allied healthcare professionals for temporary assignments to Advantage RN. The closing of this transaction occurred on January 4, 2010. After giving effect to the purchase price adjustment mechanism in the agreement, the final purchase price was $375,000. As previously reported, Advantage RN was obligated to make rent subsidy payments to TeamStaff Rx totaling $125,000, with which it has not complied. The Company is pursuing a claim against Advantage RN for all amounts owed and has provided an allowance of $50,000 representing its estimate of uncollectible amounts.

Condensed Financial Information

There was no income statement activity in respect of the discontinued operation during the three or nine months ended June 30, 2012 and 2011. The following chart details liabilities from the discontinued operation (amounts in thousands):

Liabilities	June 30, 2012		September 30, 2011
Accrued expenses and other current liabilities	$	193	$	235
Total liabilities	$	193	$	235

- Definition

The entire disclosure for the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the segment in which the disposal group was reported, and the classification (whether sold or classified as held for sale) and carrying value of the assets and liabilities comprising the disposal group. Includes all disposal groups, including those classified as components of the entity (discontinued operations).

+ References

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+ Details

COMMITMENTS AND CONTINGENCIES:

9 Months Ended

Jun. 30, 2012

COMMITMENTS AND CONTINGENCIES:

COMMITMENTS AND CONTINGENCIES:

(4) COMMITMENTS AND CONTINGENCIES:

Payroll Taxes

DLH has received notices from the Internal Revenue Service (“IRS”) claiming taxes, interest and penalties due related to payroll taxes predominantly from its former PEO operations which were sold in fiscal 2003. DLH has also received notices from the IRS reporting overpayments of taxes. Management believes that these notices are predominantly the result of misapplication of payroll tax payments between its legal entities. If not resolved favorably, the Company may incur interest and penalties. Until the sale of certain assets related to the former PEO operations, DLH operated through 17 subsidiaries, and management believes that the IRS has not correctly identified payments made through the different entities, therefore leading to the notices. DLH has been working with the IRS to resolve these discrepancies and has had certain interest and penalty claims abated. DLH has also received notices from the Social Security Administration claiming variances in wage reporting compared to IRS transcripts. DLH believes the notices from the Social Security Administration are directly related to the IRS notices received. DLH had retained the services of Ernst & Young LLP as a consultant to assist in resolving certain of these matters with the IRS and Social Security Administration. DLH believes that after the IRS applies all the funds correctly, any significant interest and penalties will be abated; however, there can be no assurance that each of these matters will be resolved favorably. In settling various years for specific subsidiaries with the IRS, the Company has received refunds for those specific periods; however, as the process of settling and concluding on other periods and subsidiaries is not yet completed, the potential exists for related penalties and interest. The remaining liability ($1.3 million at June 30, 2012) has been recorded in accounts payable and includes estimated penalties and interest currently sought by the IRS totaling approximately $500,000.

The Company believes it has accrued for the entire estimated remaining liability, inclusive of interest and penalties through the date of the financial statements. The Company may incur additional interest and penalties through the future date that this obligation is settled, however, it is not currently possible to estimate what, if any, additional amount(s) may be claimed in the future, given the uncertain timing and nature of any future settlement negotiations. No payments were made in fiscal 2011 and fiscal 2012. Management believes that the ultimate resolution of these remaining payroll tax matters will not have a significant adverse effect on its financial position or future results of operations. The Company’s intention is that it will in due course seek to negotiate a mutually satisfactory payment plan with the IRS, but there is no assurance that it would be successful in doing so and the Company’s future cash flows and liquidity could therefore be materially affected by this matter.

Legal Proceedings

As a commercial enterprise and employer, we are subject to various claims and legal actions in the ordinary course of business. These matters can include professional liability, employment-relations issues, workers’ compensation, tax, payroll and employee-related matters and inquiries and investigations by governmental agencies regarding our employment practices or other matters. We are not aware of any pending or threatened litigation that we believe is reasonably likely to have a material adverse effect on our results of operations, financial position or cash flows. However, we have been recently advised of a claim by the US Attorney based on an alleged failure to pay certain classes of employees the prevailing wages as required by the Service Contract Act during the years 2003 - 2010. These claims appear to be similar to the claims previously disclosed by DLH and related to services provided to the Department of Veterans Affairs by DLH. See “Potential Contractual Billing Adjustments” in the Management Discussion and Analysis. To date no details have been provided and therefore DLH cannot assess either the merits of the claim or the potential impact on DLH. DLH does believe it has acted in conformity with its contractual commitments; nevertheless, there can be no assurance that an adverse decision or settlement would not have a material adverse impact on DLH. See also “Risk Factors” in the Company’s Form 10-K for the fiscal year ended September 30, 2011.

In connection with its healthcare business, DLH is exposed to potential liability for the acts, errors or omissions of its healthcare employees. The professional liability insurance policy provides up to $5,000,000 aggregate coverage with a $2,000,000 per occurrence limit. Although DLH believes the liability insurance is reasonable under the circumstances to protect it from liability for such claims, there can be no assurance that such insurance will be adequate to cover all potential claims.

Leases

On June 29, 2011, TeamStaff, Inc. entered into a lease agreement (the “New Lease”) for property located at 1776 Peachtree Street, NW, Atlanta, Georgia (the “New Premises”) with an affiliate of the Landlord of its prior offices at 1 Executive Drive, Somerset, New Jersey (the “Somerset Offices”). Payment of rent under the New Lease commenced 90 days after November 23, 2011, the date of occupancy in the New Premises. The New Premises consist of approximately 4,000 square feet and the annual base rent under the New Lease is initially approximately $75,500 and will periodically increase to a maximum of approximately $88,700. The Landlord and the Company entered into a lease surrender agreement executed in conjunction with the New Lease providing that the Somerset Offices be immediately surrendered at no charge upon the Company’s occupancy of the New Premises. The term of the New Lease is for a period of 68 months commencing on November 23, 2011, the date of occupancy in the New Premises. The Company believes that this facility has substantial additional capacity for expansion.

- Definition

The entire disclosure for commitments and contingencies.

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+ Details

PREPAID WORKERS' COMPENSATION:

9 Months Ended

Jun. 30, 2012

PREPAID WORKERS' COMPENSATION:

PREPAID WORKERS' COMPENSATION:

(5) PREPAID WORKERS’ COMPENSATION:

As part of the Company’s discontinued PEO operations, DLH had a workers’ compensation program with Zurich American Insurance Company (“Zurich”) which covered the period from March 22, 2002 through November 16, 2003, inclusive. Payments for the policy were made to a trust monthly based on projected claims for the policy period. Interest on all assets held in the trust is credited to DLH. Payments for claims and claims expenses are made from the trust. From time-to-time, trust assets have been refunded to the Company based on Zurich’s and managers’ overall assessment of claims experience and historical and projected settlements. The final amount of trust funds that could be refunded to the Company is subject to a number of uncertainties (e.g. claim settlements and experience, health care costs, the extended statutory filing periods for such claims); however, based on a third party’s study of claims experience, DLH estimates that at June 30, 2012, the remaining prepaid asset of $0.3 million will be received within the next twelve to thirty-six months. This amount is reflected on DLH’s balance sheet as June 30, 2012 as a current asset, in addition to approximately $0.2 million related to other policy deposits.

DEBT:

9 Months Ended

Jun. 30, 2012

DEBT:

DEBT:

(6) DEBT:

Loan Facility

On July 29, 2010, DLH Solutions entered into a Loan and Security Agreement (the “Loan Agreement”) with Presidential Financial Corporation (the “Lender”). Under the Loan Agreement, the Lender agreed to provide a two (2) year secured loan facility to DLH Solutions in an aggregate amount of up to $1.5 million, upon the further terms and subject to the conditions of the Loan Agreement. In November, 2010, the Lender agreed by means of an amendment to the Loan Agreement to increase the maximum amount available under the facility from $1.5 million to $2.5 million and on February 9, 2011, we entered into a further amendment to the Loan Agreement pursuant to which the Lender agreed to further increase our maximum availability under the Loan Agreement from $2.5 million to $3.0 million and to provide an unbilled receivable facility within the limits of the Loan Agreement. The February 2011 amendment also extended the term of the Loan Agreement by 12 months, to July 29, 2013.

In May 2012, the Company entered into a further amendment to the Loan Agreement (the “Fifth Amendment”) pursuant to which the Lender agreed to increase the available line of credit from $3,000,000 to a maximum amount of $6,000,000 and to increase the maximum amount available under the unbilled accounts facility of the Loan Agreement from $500,000 to $1,000,000. The Company’s ability to borrow against the increased available credit, however, is subject to the satisfaction of certain conditions. The Fifth Amendment provides for an initial sublimit under the maximum loan amount of $3,000,000 (the “Initial Sublimit”) and an adjusted sublimit of $4,000,000 (the “Adjusted Sublimit”). The Initial Sublimit of $3,000,000 will remain in effect until the satisfaction of the following conditions: (i) the repayment of the $500,000 over-advance accommodation agreed to by Lender as of May 9, 2012, (ii) the Company’s demonstration of the need for the increase, (iii) the Company’s continued compliance with the Loan Agreement, and (iv) Lender, in its sole discretion, agrees to increase the Initial Sublimit. In the event that the foregoing conditions are satisfied, the credit available to under the Loan Agreement shall remain subject to the Adjusted Sublimit until the parties receive any required waivers or consents from the holders of the Company’s subordinated Convertible Debentures issued as of July 28, 2011 and Lender, in its sole discretion, agrees to such further increase. In addition, the increased availability under the unbilled accounts facility of the Loan Agreement is subject to the satisfaction of the same conditions that are applicable to Initial Sublimit. Accordingly, until these conditions are satisfied, the current borrowing limits remain in effect.

An interest rate premium of 2% is payable in respect of any advances secured by unbilled accounts receivable, which are subject to a sub-facility limit of $500,000 and an advance rate of 75%. The loan is secured by a security interest and lien on all of DLH Solutions’ cash accounts, account deposits, letters of credit and investment property, chattel paper, furniture, fixtures and equipment, instruments, investment property, general intangibles, deposit accounts, inventory, other property, all proceeds and products of the foregoing (including proceeds of any insurance policies and claims against third parties for loss of any of the foregoing) and all books and records related thereto. DLH Solutions’ ability to request loan advances under the Loan Agreement is subject to (i) computation of DLH Solutions’ advance availability limit based on “eligible accounts receivables” (as defined in the Loan Agreement) multiplied by the “Accounts Advance Rate” established by the Lender which initially shall be 85% and may be increased or decreased by the Lender in exercise of its discretion; and (ii) compliance with the covenants and conditions of the loan.

Under the Loan and Security Agreement, interest accrues at the greater of (a) 3.25% or (b) (i) 1.95% above the Wall Street Journal Prime rate on the accounts receivable portion of the credit line and (ii) 3.95% above the Wall Street Journal Prime rate on the unbilled accounts portion. In addition, DLH Solutions will pay certain other related fees and expense reimbursements including a monthly service charge of 0.65% based on the average daily loan balance which shall accrue daily and be due and payable on the last day of each month so long as the Loan Agreement is outstanding. The interest rate in effect at June 30, 2012 and 2011 was 5.2% and 5.5%, respectively. At June 30, 2012, based on current eligible accounts receivable, the amount of the unused availability under the line was $588,000. The amount outstanding as of June 30, 2012 was $1,464,000.

The Loan Agreement requires compliance with customary covenants and contains restrictions on the Company’s ability to engage in certain transactions. Among other matters, under the loan agreement we may not, without consent of the Lender, (i) merge or consolidate with another entity, form any new subsidiary or acquire any interest in a third party; (ii) acquire any assets except in the ordinary course of business; (iii) enter into any transaction outside the ordinary course of business; (iv) sell or transfer collateral; (v) make any loans to, or investments in, any affiliate or enter into any transaction with an affiliate other than on an arms-length basis; (vi) incur any debt outside the ordinary course of business; (vii) pay or declare any dividends or other distributions; or (viii) redeem, retire or purchase any of our equity interests exceeding $50,000. Further, without the consent of the Lender, the Company is also restricted from making any payments in respect of other outstanding indebtedness. The Lender agreed to eliminate the tangible net worth covenant as part of the Fifth Amendment. The Lender may terminate the Loan Agreement at any time upon 60 days written notice after December 31, 2012 and the Loan Agreement provides for customary events of default following which the Lender may, at its option, terminate the loan agreement and accelerate the repayment of any amount outstanding. The defined events of default include, among other things, a material adverse change in the Company’s circumstances, or if the Lender deems itself insecure in the ability of the Company to repay its obligations, or as to the sufficiency of the collateral.

On May 9, 2012, Presidential Financial Corporation agreed to allow the Company to borrow up to $500,000 under its facility with the Company in excess of the eligible collateral, but subject to the maximum loan amount of $3,000,000. This arrangement expired with the closing of the rights offering on June 15, 2012. There were no advances against this facility.

In consideration of the Lender entering into the Fifth Amendment, we agreed to pay a monthly collateral monitoring fee, a documentation fee and at the time that we may borrow amounts in excess of the Initial Sublimit, an origination fee of 1% of the increased availability.

The Company has concurrently executed a Corporate Guaranty Agreement with Lender pursuant to which it has guaranteed all of the obligations of DLH Solutions under the Loan Agreement.

Notes Payable

DLH, and DLH Solutions entered into a settlement agreement dated as of July 22, 2011 (the “Agreement”) with Roger Staggs and E. Barry Durham, the former principals of RS Staffing Services, Inc. (together, the “Sellers”). The Sellers were the holders of certain promissory notes issued by DLH in the aggregate principal amount of $1,500,000 (the “Notes”). The claims resolved by the Settlement Agreement concerned DLH’s claim of indemnification of approximately $1,800,000 arising out of the acquisition by DLH, of RS Staffing Services, Inc. in June 2005 and certain counterclaims by the Sellers against DLH, including payment under the Notes. Pursuant to the Agreement, the Company paid $200,000 in cash to the Sellers, and issued them an aggregate of 300,000 shares of common stock of DLH, valued at $795,000, the fair value of the stock at July 22, 2011. The Company also agreed to permit the Sellers to resell an aggregate of 201,724 other shares of common stock of DLH which were held by them, and against which the Company had previously placed a stop order to prevent their resale. The Sellers agreed to orderly sale limitations with respect to their ability to resell all their shares of common stock of DLH. In accordance with these limits, during the 90 day period commencing on the effective date of the Agreement, neither Seller was permitted to resell in excess of 33,000 shares of DLH common stock previously held by them during any 30 day period without the consent of DLH. With respect to the new shares of DLH common stock issued pursuant to the Agreement, commencing on the six month anniversary of the effective date of the Agreement, neither was permitted to resell in excess of 25,000 shares during any 30 day period without the consent of DLH. In addition, DLH provided guarantees to the Sellers that the net proceeds to be received by them from the resale of all of the shares of common stock of DLH, Inc. sold by them pursuant to the Agreement would not be less than certain minimum guarantees. With respect to the shares of common stock of DLH owned by them prior to the effective date of the Agreement (the “Old Shares”), DLH guaranteed to each Seller net proceeds of $100,000, and with respect to the shares of common stock of DLH issued under the Agreement (the “New Shares”), DLH guaranteed net proceeds of $375,000 to each. The guarantees in respect of the Old Shares were satisfied in full as of September 30, 2011.

The payments of all amounts under the Agreement are secured by the Notes. Upon receipt by the Sellers of: (i) the payment of $200,000 made by DLH and (ii) the proceeds realized from the sale of the Old Shares and New Shares, or the guarantees, the Notes shall be deemed satisfied in full. In addition, the parties agreed to release each other from any further claims that either may have against the other, except to enforce the Agreement. At June 30, 2012, the maximum remaining contingent liability under the agreement could potentially reach $750,000. The Company’s current estimate of this contingent liability is discussed in Note 10 of these Notes to Consolidated Financial Statements.

The remaining liability under the Agreement does not accrue interest. The Company has evaluated the status of the Agreement, including the amount of consideration that is contingently owed to the Sellers, as well as the uncertainties inherent in predicting future market conditions and whether the Sellers are able to realize sufficient proceeds on sales of New Shares to satisfy the Company’s guarantee. Based on such analysis, the Company has concluded at June 30, 2012 that the $711,000 recorded obligation (which approximated the maximum amount of the guarantee) remaining after issuance of the 300,000 New Shares at a total fair value of $795,000 and the cash payment of $200,000 is reasonable. Although no assurances can be given, should the Sellers be able to individually realize proceeds through future sales of New Shares, the Company may reduce the recorded liability in future periods and recognize a gain. There was no gain recognized in the three months or nine months ended June 30, 2012.

The Company did not recognize any expenses related to legal representation and costs incurred in connection with the investigation and settlement in the three months or nine months ended June 30, 2012.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References + Details

EQUITY AND CONVERTIBLE DEBENTURES FINANCING

9 Months Ended

Jun. 30, 2012

EQUITY AND CONVERTIBLE DEBENTURES FINANCING

EQUITY AND CONVERTIBLE DEBENTURES FINANCING

(7) EQUITY AND CONVERTIBLE DEBENTURES FINANCING

On March 31, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a limited number of accredited investors pursuant to which the Company sold for $225,000 an aggregate of 459,181 shares of its Common Stock to such persons in a private transaction (the “Equity Investment”). The purchasers participating in the transaction are members of the Company’s Board of Directors and management team (the “Purchasers”). The transaction closed on March 31, 2011. Of this amount, the Company received $150,000 in total cash proceeds for the purchase of the shares of Common Stock and three of the purchasers agreed with the Company to pay the purchase price for the shares of Common Stock by granting an offsetting credit to the Company for an amount equal to the purchase price and authorizing the Company to apply such credit against any obligation of the Company to such person within twelve months of the closing date, except for base salary. The shares to which the credit relates were to be held by the Company until the credit is applied and will be cancelled upon the one-year anniversary to the extent the credit is not applied. The aggregate amount of such credits totaled $75,000 and were fully exercised during 2012. The Company has used these cash proceeds for general working capital. The value ascribed to the Equity Investment was based on the fair value of the Company’s stock on March 31, 2011. On May 18, 2011, the Company issued 51,020 shares of Common Stock to its counsel in connection with an arrangement to cancel $25,000 of outstanding fees.

On June 1, 2011, the Company entered into a debenture purchase agreement (the “Debenture Purchase Agreement”) with entities affiliated with Wynnefield Capital, Inc. (the “Debenture Purchasers”), providing for a standby commitment pursuant to which the Debenture Purchasers agreed to purchase convertible debentures (the “Convertible Debentures”) in an aggregate principal amount of up to $350,000 (the “Total Commitment Amount”). In addition, the Company issued the Debenture Purchasers warrants to purchase an aggregate of 53,846 shares of common stock (the “Warrants”) in consideration of their agreement to provide the Total Commitment Amount. On July 28, 2011, the Company drew down the entire amount of the Total Commitment amount available under the Debenture Purchase Agreement, of which $200,000 was used for the initial payments under the Debenture Purchase Agreement relating to the settlement with the former owners of RS Staffing, and on such date the Company issued the Convertible Debentures in the aggregate principal amount of $350,000 to the Debenture Purchasers, and received such funds.

The Convertible Debentures will mature on the 27-month anniversary of issuance and bear interest at the rate of the greater of the prime rate plus 5%, or 10% per annum, payable at maturity or upon redemption of such Convertible Debentures. The interest rate at June 30, 2012 was 10%. The Convertible Debentures were initially convertible into shares of the Company’s common stock at an initial conversion price of $1.30 per share, which was in excess of the fair market value of the Company’s common stock at that date. The initial conversion rate is subject to adjustment to account for certain customary events and also includes weighted-average anti-dilution protection for future issuances by the Company, subject to certain exclusions. The Company can also redeem the outstanding Convertible Debentures at any time at 120% of the remaining principal amount, plus accrued but unpaid interest. The Warrants are exercisable for five years at an initial exercise price equal to $1.00. The initial exercise price of the Warrants is subject to adjustment for certain customary events and includes weighted average anti-dilution protection for future issuances by the Company, subject to certain exclusions. In connection with the parties’ entry into the Debenture Purchase Agreement, the Company, DLH Solutions, the Debenture Purchasers and Presidential Financial Corporation entered into subordination agreements concerning the terms of the subordination of the Convertible Debentures to the secured loan facility provided by Presidential Financial Corporation. Under the subordination agreements, the Company may not make payments to the Debenture Purchasers under the Convertible Debentures unless before and following such payments, no “Event of Default” exists under the secured loan facility.

As a result of the rights offering, the conversion rate of the Convertible Debentures was adjusted to $1.25 and the exercise price of the Warrants was adjusted from $1.00 to $0.96 per share.

The Debenture Purchasers are entities affiliated with Wynnefield Capital, Inc., the Company’s largest shareholder. Mr. Peter Black, a member of the Company’s Board of Directors, is an employee of Wynnefield Capital. The Convertible Debentures and Warrants are restricted securities issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”).

Direct costs associated with the Debenture Purchase Agreement totaled $31,000. These costs have been and will be capitalized as deferred financing costs and amortized over the period that such debentures are outstanding or the Debenture Agreement is effective. In addition, an initial value of $42,000 was ascribed to the warrants and it was determined that at July 28, 2011, because of appreciation in the Company’s stock price, the embedded conversion feature included in the Convertible Debentures had a fair value of $289,000 at the time of issuance of the Convertible Debentures; such amount is also being expensed over the life of the Convertible Debentures and the unamortized amounts have been deducted from the value of the Convertible Debentures as noted below. As a result of the rights offering the initial value of the warrants were revalued with minimal change and the value of the Convertible Debenture of $289,000 was revalued at $307,000.

At June 30, 2012, there were 53,846 warrants outstanding and the principal amount of the Convertible Debentures is convertible into 280,682 shares of common stock under the terms of the conversion feature embedded in the Convertible Debentures. The amount of shares of common stock under the conversion feature embedded in the Convertible Debenture was revalued from 269,230 shares to 280,682 as a result of adjustment to the conversion price due to the rights offering. Because the warrants and the conversion feature embedded in the Convertible Debenture have a weighted average anti-dilution feature that in certain circumstances could provide the holders with protection against changes in the market value of the Company’s common stock, they are required under applicable accounting standards to be recorded at fair value as of the balance sheet date. At June 30, 2012 and September 30, 2011, the Company evaluated the fair value of the Warrants and the embedded conversion feature of the Convertible Debentures using a binomial valuation model and recorded income in the amount of $186,000 for the three months ended June 30, 2012, and expense in the amount of $102,000 for the nine months ended June 30, 2012, to reflect the net difference between their carrying values at September 30, 2011 and their fair values as of June 30, 2012 using the closing stock price as of June 30, 2012 for a total value of $122,000.

The payment of the entire $350,000 principal amount of the Convertible Debentures is contractually due in the fiscal year ending September 30, 2014. The Company has evaluated the likelihood of satisfying the liability associated with the financial instruments in fiscal 2012 and has concluded that the classification of this liability is non-current at June 30, 2012

On March 16, 2012, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission for a rights offering in which existing stockholders of the Company will receive non-transferable rights to purchase $4.2 million of additional shares of its common stock. Under the terms of the rights offering, the Company distributed, at no charge to the holders of its common stock as of the record date of April 10, 2012, non- transferable subscription rights for each share of common stock owned on the record date. Each subscription right entitled the holder to purchase 0.532 shares of the Company’s common stock at a price of $1.30 per share. The rights offering also includes an over-subscription privilege, which entitled a holder who exercises its basic subscription privilege in full the right to purchase additional shares of common stock that remain unsubscribed at the expiration of the rights offering, subject to the availability and pro rata allocation of shares among persons exercising this over-subscription right.

In connection with the rights offering, on April 30, 2012, the Company entered into a standby purchase agreement with Wynnefield Capital, Inc. (“Wynnefield Capital”), which owned, prior to the rights offering, approximately 21% of the Company’s Common Stock through certain affiliated entities. Pursuant to the standby purchase agreement, Wynnefield Capital (or affiliated assignees) agreed to acquire from us in the rights offering, subject to the satisfactions of specified conditions, the shares of common stock that relate to any rights that remain unexercised at the expiration of the rights offering. Mr. Peter Black, a member of our board of directors, is a n employee of Wynnefield Capital. We entered into a registration rights agreement with Wynnefield Capital whereby we will, at our cost and expense, register for resale under the Securities Act of 1933, all shares of common stock beneficially owned by Wynnefield Capital, including shares purchased by Wynnefield Capital in the rights offering. We have agreed to file a registration statement with the SEC within 90 days of closing of the rights offering.

The Company completed the closing of the rights offering on June 15, 2012 and raised gross proceeds of $4.2 million from the sale of 3,230,769 shares of its common stock. As a result, the total number of shares of the Company’s common stock outstanding increased to 9,305,702 shares. Officers and directors purchased an aggregate of 137,678 shares in the rights offering and entities affiliated with Wynnefield Capital purchased a total of 2,840,251 shares of our common stock.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY

9 Months Ended

Jun. 30, 2012

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY

(8) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY

In May 2011, the FASB amended existing guidance on fair value measurements to clarify certain disclosure requirements and improve consistency with international reporting standards. This amendment is to be applied prospectively and is effective for the Company’s fiscal quarter ending March 31, 2012. The adoption of this guidance did not have a material effect on prospective financial statements.

The FASB amended existing guidance on reporting comprehensive income in June 2011 to require entities to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendment does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income under current accounting principles generally accepted in the United States of America. This guidance is effective for the Company’s fiscal quarter ending March 31, 2012 and its adoption did not have a material effect on the financial statements.

In August 2011, the FASB approved a revised accounting standard to simplify the testing of goodwill for impairment. The guidance permits an entity to first assess defined qualitative factors in determining whether it is necessary to perform the goodwill impairment test. The guidance is effective for annual and interim goodwill impairment tests for the Company’s fiscal year ending September 30, 2013. The Company is currently evaluating the prospective effects, if any, of adopting this guidance.

In December 2011, the FASB amended disclosure concerning offsetting assets and liabilities. The amendments in the update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. This scope would include derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities borrowing and securities lending arrangements. The amendment is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company is currently evaluating the prospective effects, if any, of adopting this guidance.

In July 2012, the FASB further amended existing guidance on testing indefinite lived intangible assets for impairment. The amendments are intended to reduce the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. This update applies to all entities, both public and nonpublic, that have indefinite-lived intangible assets, other than goodwill, reported in their financial statements. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued. The Company is currently evaluating the prospective effects, if any, of adopting this guidance.

- Definition

The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Direct Effects of a Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6510796

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6507316

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6801783&loc=d3e22583-107794

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Indirect Effects of a Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6515603

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.10-01.(b)(6))
-URI http://asc.fasb.org/extlink&oid=6958853&loc=d3e46468-122699

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6801783&loc=d3e22580-107794

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Accounting Change
-URI http://asc.fasb.org/extlink&oid=6503790

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6801783&loc=d3e22499-107794

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Retrospective Application
-URI http://asc.fasb.org/extlink&oid=6523989

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section 45
-Paragraph 12
-URI http://asc.fasb.org/extlink&oid=6372559&loc=d3e725-108305

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section 45
-Paragraph 13
-URI http://asc.fasb.org/extlink&oid=6372559&loc=d3e765-108305

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 01
-Paragraph b
-Subparagraph 6
-Article 10

+ Details

MANAGEMENT TRANSITION AND NEW CHIEF FINANCIAL OFFICER

9 Months Ended

Jun. 30, 2012

MANAGEMENT TRANSITION AND NEW CHIEF FINANCIAL OFFICER

MANAGEMENT TRANSITION AND NEW CHIEF FINANCIAL OFFICER

(9) MANAGEMENT TRANSITION AND NEW CHIEF FINANCIAL OFFICER

On June 25, 2012, the Company entered into an employment agreement with Ms. Kathryn M. JohnBull pursuant to which she became the Company’s Chief Financial Officer commencing on June 25, 2012. On June 25, 2012, the Company’s employment of John E. Kahn, who had served as its Chief Financial Officer, terminated. As of the date of this report, no new compensatory or severance arrangements have been entered into in connection with Mr. Kahn’s departure. The following is a description of the Company’s employment agreement with Ms. JohnBull, which is qualified in its entirety by reference to the full text of such agreement.

The employment agreement is for an initial term of three years from its commencement date of June 25, 2012. Under the employment agreement, Ms. JohnBull will receive a base salary of $225,000 per annum and may receive an annual bonus of up to 50% of base salary based on performance targets and other key objectives established by the Management Resources and Compensation Committee of the board of directors; however, $31,000 of the annual bonus for her initial year of employment is guaranteed. The Company granted Ms. JohnBull options to purchase 250,000 shares of common stock under its 2006 Long Term Incentive Plan, as amended, subject to vesting. The options, to the extent vested, shall be exercisable for a period of ten years at the per share exercise price equal to the fair market value of the Company’s common stock on the commencement date of her employment. In the event of the termination of employment by us without “cause” or by her for “good reason”, she will be entitled to a severance payment of 12 months of base salary and will be entitled to a payment equal to 12 months of base salary if her employment is terminated in connection with a change in control of the Company.

SUBSEQUENT EVENTS:

9 Months Ended

Jun. 30, 2012

SUBSEQUENT EVENTS:

SUBSEQUENT EVENTS:

(10) SUBSEQUENT EVENTS:

Management evaluated subsequent events through the date these financial statements were issued. Based on this evaluation, the Company has determined that certain subsequent events have occurred which require disclosure through the date that these financial statements are issued.

With respect to the Company’s guarantee under the Agreement described in Note 6 — Note Payable, above, the Company believes that its guarantee with respect to one-half of the aggregate amount of New Shares was extinguished as of July 22, 2012. With respect to the remaining potential guarantee, the Company is in the process of reconciling information pertaining to sales of New Stock consummated by a Seller in order to ascertain its potential liability under this arrangement. As of August 6, 2012, the Company estimates that its liability under this Agreement will not exceed $355,500.

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES: (Policies)

9 Months Ended

Jun. 30, 2012

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES:

Liquidity

Liquidity

Basis of Presentation

Basis of Presentation

Revenue Recognition

Revenue Recognition

Goodwill

Goodwill

Intangible Assets

Intangible Assets

Income Taxes

Income Taxes

Stock-Based Compensation

Stock-Based Compensation

Stock Options, Warrants and Restricted Stock

The stock option activity for the nine months ended June 30, 2012 is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding, September 30, 2011	1,537,500		$	1.19	9.3	$	743,785
Granted	275,000		$	1.39
Cancelled	(350,000	)	$	1.38
Exercised	—		—
Options outstanding, June 30, 2012	1,462,500		$	1.19	8.8	$	158,375

At June 30, 2012, there were 52,500 shares of unvested restricted stock outstanding. As of June 30, 2012, there is $150,000 of unrecognized expense related to unvested restricted stock awards.

Changes in Shareholders Equity

Changes in Shareholders’ Equity

The following is the changes in Shareholders’ Equity for the three months ended June 30, 2012:

(AMOUNTS IN THOUSANDS)

				Additional										Total
	Common Stock			Paid-In			Accumulated			Treasury Stock				Shareholders’
	Shares	Amount		Capital			Deficit			Shares	Amount			Equity

BALANCE, March 31, 2012	6,075	$	6	$	71,250		$	(66,520	)	2	$	(24	)	$	4,712

Director restricted stock grants	—			—										—
Exercise of stock options														—
Proceeds from sale of commons stock		3												3
Issuance of shares for services				2										2
Expense related to employee stock option grants				78										78
Fees related to rights offering				(177		)								(177		)
Non employee options				8										8
Warrant expense				(42		)								(42		)
Expense related to employee restricted stock grants				—										—
Rights offering	3,231			4,197										4,197
Net loss							(568		)					(568		)

BALANCE, June 30, 2012	9,306	$	9	$	75,316		$	(67,088	)	2	$	(24	)	$	8,213

The following is the changes in Shareholders’ Equity for the nine months ended June 30, 2012:

(AMOUNTS IN THOUSANDS)

				Additional											Total
	Common Stock			Paid-In			Accumulated			Treasury Stock					Shareholders’
	Shares	Amount		Capital			Deficit			Shares		Amount			Equity

BALANCE, September 30, 2011	6,021	$	6	$	70,988		$	(65,416	)	2		$	(24	)	$	5,554

Director restricted stock grants	54			123											123
Proceeds from sale of commons stock		3													3
Issuance of shares for services				12											12
Expense related to employee stock option grants				145											145
Fees related to rights offering				(184		)									(184		)
Non employee option expense				19											19
Warrant expense				(34		)									(34		)
Expense related to employee restricted stock grants				50											50
Rights offering	3,231			4,197											4,197
Net loss							(1,672		)						(1,672		)

BALANCE, June 30, 2012	9,306	$	9	$	75,316		$	(67,088	)	$	2	$	(24	)	$	8,213

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Loss Per Share

Loss Per Share

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES: (Tables)

9 Months Ended

Jun. 30, 2012

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES:

Schedule of stock option activity

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding, September 30, 2011	1,537,500		$	1.19	9.3	$	743,785
Granted	275,000		$	1.39
Cancelled	(350,000	)	$	1.38
Exercised	—		—
Options outstanding, June 30, 2012	1,462,500		$	1.19	8.8	$	158,375

Schedule of changes in Stockholders' equity

(AMOUNTS IN THOUSANDS)

				Additional										Total
	Common Stock			Paid-In			Accumulated			Treasury Stock				Shareholders’
	Shares	Amount		Capital			Deficit			Shares	Amount			Equity

BALANCE, March 31, 2012	6,075	$	6	$	71,250		$	(66,520	)	2	$	(24	)	$	4,712

Director restricted stock grants	—			—										—
Exercise of stock options														—
Proceeds from sale of commons stock		3												3
Issuance of shares for services				2										2
Expense related to employee stock option grants				78										78
Fees related to rights offering				(177		)								(177		)
Non employee options				8										8
Warrant expense				(42		)								(42		)
Expense related to employee restricted stock grants				—										—
Rights offering	3,231			4,197										4,197
Net loss							(568		)					(568		)

BALANCE, June 30, 2012	9,306	$	9	$	75,316		$	(67,088	)	2	$	(24	)	$	8,213

(AMOUNTS IN THOUSANDS)

				Additional											Total
	Common Stock			Paid-In			Accumulated			Treasury Stock					Shareholders’
	Shares	Amount		Capital			Deficit			Shares		Amount			Equity

BALANCE, September 30, 2011	6,021	$	6	$	70,988		$	(65,416	)	2		$	(24	)	$	5,554

Director restricted stock grants	54			123											123
Proceeds from sale of commons stock		3													3
Issuance of shares for services				12											12
Expense related to employee stock option grants				145											145
Fees related to rights offering				(184		)									(184		)
Non employee option expense				19											19
Warrant expense				(34		)									(34		)
Expense related to employee restricted stock grants				50											50
Rights offering	3,231			4,197											4,197
Net loss							(1,672		)						(1,672		)

BALANCE, June 30, 2012	9,306	$	9	$	75,316		$	(67,088	)	$	2	$	(24	)	$	8,213

DISCONTINUED OPERATION: (Tables)

9 Months Ended

Jun. 30, 2012

DISCONTINUED OPERATION:

Schedule of details of liabilities from the discontinued operations

Liabilities	June 30, 2012		September 30, 2011
Accrued expenses and other current liabilities	$	193	$	235
Total liabilities	$	193	$	235

ORGANIZATION AND BUSINESS: (Details)	9 Months Ended
ORGANIZATION AND BUSINESS: (Details)	Jun. 30, 2012 item
ORGANIZATION AND BUSINESS:
Minimum period for which entity has provided professional services to the U.S. Government	25 years
Number of employees	1,000
Minimum number of locations in which entity operates	25

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES: (Details)	1 Months Ended				3 Months Ended			6 Months Ended	9 Months Ended		12 Months Ended
	Jun. 30, 2012 USD ($) shares	Apr. 30, 2012 $ / shares shares	Mar. 31, 2012 USD ($)	Jul. 31, 2011 USD ($)	Jun. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Jun. 30, 2011 USD ($)	Mar. 31, 2011 USD ($)	Jun. 30, 2012 USD ($)	Jun. 30, 2011 USD ($)	Sep. 30, 2011 USD ($)	Sep. 30, 2008 USD ($)	May 31, 2012 USD ($)	Apr. 10, 2012 $ / shares shares	Mar. 16, 2012 shares	Feb. 09, 2011 USD ($)	Nov. 30, 2010 USD ($)	Sep. 30, 2010 USD ($)	Jul. 29, 2010 USD ($)
Liquidity
Net working capital deficit	$ 1,100,000				$ 1,100,000				$ 1,100,000
Accumulated deficit	$ 67,088,000				67,088,000	$ 65,416,000			67,088,000		$ 65,416,000
Operating loss					625,000		$ 275,000		1,399,000	$ 631,000
Net loss					568,000		140,000		1,672,000	660,000
Increase in liquidity to improve the entity's cash flows and financial position											1,000,000
Additional capital from issuance of equity investments and convertible debt											500,000
Rights offering, value of securities available to be issued upon exercise of rights			$ 4,200,000
Capital provided through equity investments								$ 150,000	3,000	150,000
Capital provided by Wynnefield Capital through the sale of convertible debentures				$ 350,000
Exchange ratio of Rights Offering \| shares														0.532	0.532
Offering price of warrants or rights (in dollars per share) \| $ / shares		1.30												1.30
Ownership interest held (as a percent)		21.00%
Ownership held post rights offering (as a percent)		44.00%
Issuance of number of shares of common stock under Rights Offering \| shares	3,230,769	3,230,769
Capital raised from shares issued on rights offering	$ 4,200,000				4,197,000				4,197,000
Cash and cash equivalents	3,127,000				3,127,000	763,000	$ 711,000		$ 3,127,000	$ 711,000	$ 763,000							$ 1,187,000
Period for which effects of cost reduction programs and initiatives should be sufficient to support the Company's operations									12 months
Expected maximum total value of award under the Blanket Purchase Agreement with the DVA									$ 145,000,000
Percentage of revenue generated by contracts subject to renewal and expansion											45.00%
Percentage of revenue generated by DVA contracts which are not currently the subject of requests for proposals											50.00%
Revenue Recognition
Accrued liabilities for salaries to employees and related benefits	$ 10,597,000				$ 10,597,000	10,318,000			$ 10,597,000		$ 10,318,000
Intangible Assets
Non-cash impairment charge to write-off trademark						$ 2,600,000
Income Taxes
Valuation allowance against deferred tax assets (as a percent)	100.00%				100.00%				100.00%
Deferred tax assets, net	$ 15,800,000				$ 15,800,000				$ 15,800,000
Line of credit
Liquidity
Increase in maximum availability under the Loan and Security Agreement																$ 500,000
Maximum availability under the loan and security agreement																3,000,000	$ 2,500,000		$ 1,500,000
Maximum borrowing capacity subject to certain conditions													$ 6,000,000
Current borrowing capacity	3,000,000				3,000,000				3,000,000
Maximum sublimit available for unbilled accounts facility																$ 500,000
Maximum sublimit available for unbilled accounts facility, subject to certain conditions													$ 1,000,000
Amount outstanding	1,464,000				1,464,000				1,464,000
Amount available under the loan and security agreement	588,000				588,000				588,000
Minimum
Goodwill
Excess of estimated fair value of goodwill over carrying value (as a percent)						100.00%					100.00%
Maximum
Goodwill
Charge to be expensed, if an impairment of all the goodwill became necessary									8,600,000
Department of Veterans Affairs
Revenue Recognition
Contract revenue, nonrecurring												$ 10,800,000
Direct costs related to nonrecurring contract revenue												$ 10,100,000
Accounts receivable	9,300,000				9,300,000	$ 9,300,000			9,300,000		$ 9,300,000
Accrued liabilities for salaries to employees and related benefits	8,700,000				8,700,000	8,700,000			8,700,000		8,700,000
Unbilled accounts receivable	$ 9,300,000				$ 9,300,000	$ 9,300,000			9,300,000		$ 9,300,000
Department of Veterans Affairs \| Minimum
Revenue Recognition
Estimated additional indirect costs and fees associated with contract modification pending final approval									400,000
Department of Veterans Affairs \| Maximum
Revenue Recognition
Estimated additional indirect costs and fees associated with contract modification pending final approval									$ 600,000

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES: (Details 2) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Stock-Based Compensation
Total unrecognized compensation expense	$ 227,000		$ 227,000
Chief Financial Officer
Stock-Based Compensation
Granted (in shares)			250,000
Stock Options
Stock-Based Compensation
Share-based compensation expense	78,000	$ 17,000	$ 145,000	$ 64,000
Granted (in shares)			275,000
Exercise price of options (in dollars per share)			$ 1.39
Stock Options \| Executive Vice President
Stock-Based Compensation
Share-based compensation expense				$ 18,000
Granted (in shares)				250,000
Stock Options \| Consultants
Stock-Based Compensation
Share-based compensation expense	6,000		$ 19,000
Granted (in shares)			25,000
Unrecognized expenses related to non-employee options	6,000		$ 6,000
Exercise price of options (in dollars per share)			$ 1.88
Stock Options \| Chief Financial Officer
Stock-Based Compensation
Share-based compensation expense	$ 45,000		$ 45,000
Granted (in shares)	250,000		250,000
Restricted Stock
Stock-Based Compensation
Share-based compensation expense	$ 50,000		$ 50,000	$ 14,000
Restricted Stock \| Non-executive directors
Stock-Based Compensation
Share-based compensation expense			$ 122,550
Granted (in shares)			53,750
Closing price (in dollars per share)	$ 2.28		$ 2.28
Restricted Stock \| Non-employee directors
Stock-Based Compensation
Share-based compensation expense				$ 20,000
Granted (in shares)				35,000
Closing price (in dollars per share)		$ 0.56		$ 0.56

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES: (Details 3)	3 Months Ended	9 Months Ended	12 Months Ended
	Jun. 30, 2012 USD ($) $ / shares shares	Jun. 30, 2012 USD ($) item $ / shares shares	Sep. 30, 2011 USD ($) $ / shares shares	Apr. 30, 2012 $ / shares	Apr. 10, 2012 $ / shares
Other disclosures
Exercise price of warrants (in dollars per share) \| $ / shares				1.30	1.30
Warrant expense recognized (in dollars) \| $		$ 9,000
Stock Options
Number of Shares
Outstanding at the beginning of the period (in shares)		1,537,500
Granted (in shares)		275,000
Cancelled (in shares)		(350,000)
Outstanding at the end of the period (in shares)	1,462,500	1,462,500	1,537,500
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share) \| $ / shares		$ 1.19
Granted (in dollars per share) \| $ / shares		1.39
Cancelled (in dollars per share) \| $ / shares		1.38
Outstanding at the end of the period (in dollars per share) \| $ / shares	$ 1.19	$ 1.19	$ 1.19
Weighted Average Remaining Contractual Term
SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm2		8 years 9 months 18 days	9 years 3 months 18 days
SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm2		8 years 9 months 18 days	9 years 3 months 18 days
Aggregate Intrinsic Value
Outstanding at the beginning of the period (in dollars) \| $		$ 743,785
Outstanding at the end of the period (in dollars) \| $	$ 158,375	$ 158,375	$ 743,785
Other disclosures
Options outstanding that were vested and exercisable (in shares)	462,500	462,500
Additional options outstanding that are expected to vest (in shares)	1,000,000	1,000,000
Stock Options \| Consultants
Number of Shares
Granted (in shares)		25,000
Weighted Average Exercise Price
Granted (in dollars per share) \| $ / shares		$ 1.88
Restricted Stock
Other disclosures
Options outstanding (in shares)	52,500	52,500
Remaining costs related to non-vested restricted stock awards (in dollars) \| $	$ 150,000	$ 150,000
Employee stock options
Other disclosures
Options expiring (in shares)		137,500
Employee stock options \| Executive officers
Number of Shares
Cancelled (in shares)		(212,500)
Warrants \| Consultants
Other disclosures
Warrants granted to purchase common stock (in shares)	20,000	20,000
Exercise price of warrants (in dollars per share) \| $ / shares	2.28	2.28
Number of equal annual installments in which warrants vest \| item		2
Warrant expense recognized (in dollars) \| $	$ 3,000	$ 9,000
Warrant expense unrecognized (in dollars) \| $		$ 15,000

LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES: (Details 4) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended		9 Months Ended
	Jun. 30, 2012	Apr. 30, 2012	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Changes in Shareholders' Equity
BALANCE at the beginning of the period (in shares)		6,075,000	6,075,000		6,021,000
BALANCE at the beginning of the period		$ 4,712	$ 4,712		$ 5,554
Director restricted stock grants					123
Proceeds from sale of commons stock			3		3
Issuance of shares for services			2		12
Expense related to employee stock option grants			78		145
Fees related to rights offering			(177)		(184)
Nonemployee option expense			8		19
Warrant expense			(42)		(34)
Expense related to employee restricted stock grants rights offering					50
Rights offering (in shares)	3,230,769	3,230,769
Rights offering	$ 4,200		4,197		4,197
Net loss			$ (568)	$ (140)	$ (1,672)	$ (660)
BALANCE at the end of the period (in shares)	9,305,000		9,305,000		9,305,000
BALANCE at the end of the period	$ 8,213		$ 8,213		$ 8,213
Loss Per Share
Anti-dilutive shares			1,462,500		1,462,500
Common Stock
Changes in Shareholders' Equity
BALANCE at the beginning of the period (in shares)		6,075,000	6,075,000		6,021,000
BALANCE at the beginning of the period		$ 6	$ 6		$ 6
Director restricted stock grants (in shares)					54,000
Proceeds from sale of commons stock			$ 3		$ 3
Rights offering (in shares)			3,231,000		3,231,000
BALANCE at the end of the period (in shares)	9,306,000		9,306,000		9,306,000
BALANCE at the end of the period	$ 9		$ 9		$ 9
Additional Paid-In Capital
Changes in Shareholders' Equity
BALANCE at the beginning of the period		71,250	71,250		70,988
Director restricted stock grants					123
Issuance of shares for services			2		12
Expense related to employee stock option grants			78		145
Fees related to rights offering			(177)		(184)
Nonemployee option expense			8		19
Warrant expense			(42)		(34)
Expense related to employee restricted stock grants rights offering					50
Rights offering			4,197		4,197
BALANCE at the end of the period	75,316		75,316		75,316
Accumulated Deficit
Changes in Shareholders' Equity
BALANCE at the beginning of the period		$ (66,520)	(66,520)		(65,416)
Net loss			(568)		(1,672)
BALANCE at the end of the period	$ (67,088)		$ (67,088)		$ (67,088)
Treasury Stock
Changes in Shareholders' Equity
BALANCE at the beginning of the period (in shares)		2,000	2,000		2,000
BALANCE at the beginning of the period		$ (24)	$ (24)		$ (24)
BALANCE at the end of the period (in shares)	2,000		2,000		2,000
BALANCE at the end of the period	$ (24)		$ (24)		$ (24)

DISCONTINUED OPERATION: (Details) - USD ($)	1 Months Ended	9 Months Ended
DISCONTINUED OPERATION: (Details) - USD ($)	Mar. 31, 2010	Jun. 30, 2012	Sep. 30, 2011
Liabilities
Accrued expenses and other current liabilities		$ 193,000	$ 235,000
Total liabilities		193,000	$ 235,000
TeamStaff Rx
DISCONTINUED OPERATION
Purchase price of assets sold	$ 375,000
Liabilities
Rent subsidy obligation of the acquirer		125,000
Allowance for estimate of uncollectible amounts		$ 50,000

COMMITMENTS AND CONTINGENCIES: (Details)	1 Months Ended	9 Months Ended
COMMITMENTS AND CONTINGENCIES: (Details)	Nov. 30, 2011	Jun. 30, 2012 USD ($) item	Nov. 23, 2011 item
COMMITMENTS AND CONTINGENCIES
Number of subsidiaries until sale of assets related to PEO operation \| item		17
Annual base rent under New Lease		$ 75,500
Legal Proceedings
Aggregate coverage provided by professional liability insurance policy		5,000,000
Per occurrence coverage limit provided by professional liability insurance policy		2,000,000
Leases
Period of commencement of rent under lease agreement after date of occupancy	90 days
Area of New Premises under New Lease (in square feet) \| item			4,000
Term of New Lease	68 months
Maximum
COMMITMENTS AND CONTINGENCIES
Annual base rent under New Lease		88,700
Unfavourable action related to payroll taxes
COMMITMENTS AND CONTINGENCIES
Remaining liability for penalties and interest related to payroll taxes		1,300,000
Penalties and interest sought by IRS related to payroll taxes		$ 500,000

PREPAID WORKERS' COMPENSATION: (Details) - USD ($) $ in Thousands	9 Months Ended
	Jun. 30, 2012	Sep. 30, 2011
PREPAID WORKERS COMPENSATION
Prepaid asset	$ 517	$ 513
Workers compensation program, Zurich
PREPAID WORKERS COMPENSATION
Prepaid asset	$ 300
Workers compensation program, Zurich \| Minimum
PREPAID WORKERS COMPENSATION
Period over which remaining prepaid asset will be received	12 months
Workers compensation program, Zurich \| Maximum
PREPAID WORKERS COMPENSATION
Period over which remaining prepaid asset will be received	36 months
Workers compensation program, other policy deposits
PREPAID WORKERS COMPENSATION
Prepaid asset	$ 200

DEBT: (Details) - USD ($)	1 Months Ended			9 Months Ended
DEBT: (Details) - USD ($)	May 31, 2012	Jul. 31, 2011	Jul. 31, 2010	Jun. 30, 2012	May 09, 2012	Sep. 30, 2011	Jul. 22, 2011	Jun. 30, 2011	Feb. 09, 2011	Nov. 30, 2010	Jul. 29, 2010
DEBT:
Repayment of over-advance accomodation	$ 500,000
Amount of recorded obligation				$ 711,000		$ 711,000
Line of credit
DEBT:
Term of debt instrument			2 years
Maximum availability under the loan and security agreement									$ 3,000,000	$ 2,500,000	$ 1,500,000
Maximum borrowing capacity subject to certain conditions	6,000,000
Maximum borrowing capacity in excess of eligible collateral					$ 500,000
Extended term of debt instrument				12 months
Maximum sublimit available for unbilled accounts facility									$ 500,000
Maximum sublimit available for unbilled accounts facility, subject to certain conditions	1,000,000
Current borrowing capacity				$ 3,000,000
Initial sublimit	$ 3,000,000
Adjusted sublimit				$ 4,000,000
Initial Accounts Advance Rate (as a percent)				85.00%
Monthly service charge based on the average daily loan balance (as a percent)				0.65%
Interest rate (as a percent)				5.20%				5.50%
Amount of unused availability under the line				$ 588,000
Amount outstanding				1,464,000
Maximum amount of equity interest that the entity can redeem, retire or purchase				$ 50,000
Notice period to terminate the Loan Agreement				60 days
Origination fee (as a percent)	1.00%
Line of credit \| Unbilled accounts receivable
DEBT:
Percentage of interest rate premium payable in respect of secured advances				2.00%
Maximum sublimit available for unbilled accounts facility	$ 500,000
Maximum sublimit available for unbilled accounts facility, subject to certain conditions	$ 1,000,000
Accounts advance rate (as a percent)				75.00%
Line of credit \| Unbilled accounts receivable \| Prime Rate
DEBT:
Margin (as a percent)				3.95%
Reference rate, description				Wall Street Journal Prime rate
Line of credit \| Accounts receivable
DEBT:
Interest rate (as a percent)				3.25%
Line of credit \| Accounts receivable \| Prime Rate
DEBT:
Margin (as a percent)				1.95%
Reference rate, description				Wall Street Journal Prime rate
Notes Payable \| Sellers
DEBT:
Aggregate principal amount							$ 1,500,000
Amount of claim of indemnification resolved							$ 1,800,000
Proceeds from debt instrument used for the initial payments relating to the settlement agreement		$ 200,000
Number of shares of common stock issued		300,000
Value of common stock issued		$ 795,000
Number of shares of common stock permitted to be issued, previously restricted to prevent their resale				201,724
Period from effective date of agreement during which shares previously held are not permitted to be resold beyond a limit without any approval				90 days
Maximum number of shares previously held permitted to be resold without any approval				33,000
Period within the period from effective date of agreement during which shares previously held are not permitted to be resold a beyond limit without any approval				30 days
Period from effective date of agreement during which new shares are not permitted to be resold beyond a limit without any approval				6 months
Maximum number of new shares permitted to be resold without any approval				25,000
Period within the period from effective date of agreement during which new shares issued are not permitted to be resold beyond a limit without any approval				30 days
Proceeds guaranteed on resale of previously held shares				$ 100,000
Proceeds guaranteed on resale of new shares				375,000
Maximum contingent liability				750,000
Amount of recorded obligation				$ 711,000

EQUITY AND CONVERTIBLE DEBENTURES FINANCING (Details)	1 Months Ended						3 Months Ended	6 Months Ended	9 Months Ended
EQUITY AND CONVERTIBLE DEBENTURES FINANCING (Details)	Jun. 30, 2012 USD ($) $ / shares shares	Apr. 30, 2012 $ / shares shares	Mar. 31, 2012 USD ($) shares	Jul. 31, 2011 USD ($)	May 31, 2011 shares	Mar. 31, 2011 USD ($) shares	Jun. 30, 2012 USD ($) $ / shares shares	Mar. 31, 2011 USD ($)	Jun. 30, 2012 USD ($) shares item $ / shares	Jun. 30, 2011 USD ($)	Jun. 15, 2012 shares	Apr. 10, 2012 $ / shares shares	Mar. 16, 2012 shares	Sep. 30, 2011 shares	Jul. 28, 2011 USD ($)	Jun. 01, 2011 USD ($) shares	May 18, 2011 USD ($)
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Value of shares of common stock sold							$ 3,000		$ 3,000
Total cash proceeds received from sale of common stock								$ 150,000	3,000	$ 150,000
Offering price of warrants or rights (in dollars per share) \| $ / shares		1.30										1.30
Rights offering, value of securities available to be issued upon exercise of rights			$ 4,200,000
Exchange ratio of Rights Offering \| shares												0.532	0.532
Issuance of number of shares of common stock under Rights Offering \| shares	3,230,769	3,230,769
Ownership interest held (as a percent)		21.00%
Capital raised from shares issued on rights offering	$ 4,200,000						$ 4,197,000		$ 4,197,000
Number of shares of common stock outstanding \| shares	9,305,000		6,075,000				9,305,000		9,305,000		9,305,702			6,021,000
Issuance of number of shares to officers and directors under Rights Offering \| shares	137,678
Issuance of number of shares to entities affiliated to Wynnefield Capital \| shares	2,840,251
Income (expense) recorded related to change in the fair value of financial instruments							$ 186,000		$ 102,000
Maximum
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Period for filing registration statement with SEC		90 days
Common Stock
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Value of shares of common stock sold							$ 3,000		$ 3,000
Issuance of number of shares of common stock under Rights Offering \| shares							3,231,000		3,231,000
Number of shares of common stock outstanding \| shares	9,306,000		6,075,000				9,306,000		9,306,000					6,021,000
Purchase Agreement \| Common Stock
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Value of shares of common stock sold						$ 225,000
Number of shares of common stock sold \| shares						459,181
Total cash proceeds received from sale of common stock										$ 150,000
Number of purchasers who agreed to pay purchase price for shares of common stock by granting an offsetting credit to the entity \| item									3
Period of offsetting credit applied against any obligation									12 months
Period of cancellation of shares on which credit is not applied									1 year
Aggregate amount of offsetting credits									$ 75,000
Number of shares of common stock issued by the entity to its counsel \| shares					51,020
Outstanding fees to be cancelled																	$ 25,000
Debenture Purchase Agreement
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Income (expense) recorded related to change in the fair value of financial instruments							$ 186,000		(102,000)
Net difference between carrying value and fair value of warrants and the embedded conversion feature of the convertible debentures									$ 122,000
Debenture Purchase Agreement \| Warrants
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Warrants issued to Debenture Purchasers \| shares																53,846
Warrant exercise period									5 years
Offering price of warrants or rights (in dollars per share) \| $ / shares	1.00						1.00		1.00
Adjusted offering price of warrants or rights (in dollars per share) \| $ / shares	$ 0.96						$ 0.96		$ 0.96
Initial value of warrants															$ 42,000
Warrants outstanding \| shares	53,846						53,846		53,846
Debenture Purchase Agreement \| Convertible debentures
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Aggregate principal amount of notes issued				$ 350,000
Term of debt instrument									27 months
Interest rate as of reporting date (as a percent)	10.00%						10.00%		10.00%
Initial conversion price of debt into common stock (in dollars per share) \| $ / shares	$ 1.30						$ 1.30		$ 1.30
Percentage of remaining principal amount, plus accrued but unpaid interest at which the entity can redeem the outstanding debt									120.00%
Adjusted conversion rate (in dollars per share) \| $ / shares	$ 1.25						$ 1.25		$ 1.25
Direct costs associated with the Debenture Purchase Agreement	$ 31,000						$ 31,000		$ 31,000
Fair value of embedded conversion feature				289,000					$ 307,000
Debenture Purchase Agreement \| Convertible debentures \| Prime Rate
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Reference rate, description									Wall Street Journal Prime rate
Debenture Purchase Agreement \| Convertible debentures \| Former owners of RS Staffing
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Proceeds from debt instrument used for the initial payments under the Debenture Purchase Agreement relating to the settlement agreement				$ 200,000
Debenture Purchase Agreement \| Convertible debentures \| Maximum
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Aggregate principal amount of notes																$ 350,000
Debenture Purchase Agreement \| Convertible debentures \| Maximum \| Prime Rate
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Margin (as a percent)	10.00%						10.00%		10.00%
Debenture Purchase Agreement \| Convertible debentures \| Minimum \| Prime Rate
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Margin (as a percent)	5.00%						5.00%		5.00%
Debenture Purchase Agreement \| Convertible debentures \| Common Stock
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Shares of common stock to be issued for conversion of debt instrument \| shares									280,682
Number of shares of common stock revalued under the conversion feature \| shares											269,230
Standby purchase agreement
EQUITY AND CONVERTIBLE DEBENTURES FINANCING
Ownership interest held (as a percent)		21.00%

MANAGEMENT TRANSITION AND NEW CHIEF EXECUTIVE OFFICER (Details)	9 Months Ended
	Jun. 30, 2012 USD ($) shares
MANAGEMENT TRANSITION AND NEW CHIEF FINANCIAL OFFICER
Initial term of employment agreement	3 years
Base salary per annum of Ms. JohnBull	$ 225,000
Annual performance bonus as a percentage of base salary	50.00%
Guaranteed annual bonus for initial year of employment	$ 31,000
Chief Financial Officer
MANAGEMENT TRANSITION AND NEW CHIEF FINANCIAL OFFICER
Granted (in shares) \| shares	250,000
Period for which options are exercisable	10 years
Period for which Ms. JohnBull is entitled to a severance payment in case of termination without cause or for good reason	12 months
Period for which Ms. JohnBull is entitled to a severance payment in case of termination in connection with a change in control of the Company	12 months
Chief Financial Officer \| Common stock price per share equals or exceeds $3
MANAGEMENT TRANSITION AND NEW CHIEF FINANCIAL OFFICER
Number of consecutive days considered for common stock price per share to determine vesting of options	10 days
Chief Financial Officer \| Common stock price per share equals or exceeds $5
MANAGEMENT TRANSITION AND NEW CHIEF FINANCIAL OFFICER
Number of consecutive days considered for common stock price per share to determine vesting of options	10 days
Chief Financial Officer \| Common stock price per share equals or exceeds $7
MANAGEMENT TRANSITION AND NEW CHIEF FINANCIAL OFFICER
Number of consecutive days considered for common stock price per share to determine vesting of options	10 days

SUBSEQUENT EVENTS: (Details)	Aug. 31, 2012 USD ($)
Subsequent Event
SUBSEQUENT EVENTS:
Maximum liability under agreement	$ 355,500